TICs, San Francisco’s Involuntary Reflex: Part 2 — The Data

There are weeks when I look through the new listings on the MLS (Multiple Listing Service) and it seems like there are more TICs for sale than condominiums.  Turns out, this just isn’t true.  Here’s a chart showing relative sales volumes since 2003 (click to enlarge).

Units Sold By Month
Look at that!  Excluding those wonderfully regular dips every Xmas, condo sales are generally at around 200 units per month.  TICs rarely break 40.

Here’s how TIC and condo median prices stack up against each other on a monthly basis.

Condo vs TICs Median Prices By Month
Dueling spaghetti you say?  That was my reaction, too.  The huge variability in prices from month to month on the TIC line is a direct result of the paucity of sales.  And this chart certainly doesn’t help get at the key question, which is this:

Given that TICs are riskier and less flexible than condos, what’s the premium that you pay for buying a condo vs.  a TIC?

In fact many TIC buyers do so with the hope of being able to realize this “premium” by converting their TICs into condos down the road.  Fat chance unless you’re buying a TIC in a two unit building which — for now at least — remain exempt from San Francisco’s byzantine annual lottery system.

Luckily, I have a bona fide statistician mathematical genius phd for a wife, and she always lends a hand on methodology when I need it.  She suggested that where one set of data (condos) is so much larger than another, using averages provides a more reliable “apples to apples” comparison than medians.   Also, with so few monthly TIC sales, I decided to look at annual rather than monthly trends.

Here’s attempt number two.

Condos vs. Tics Annual Average Sales Prices

Much more useful!  (By the way, the fact that TICs were more expensive than condos in 2003 and 2004 can be explained by a few massively (in excess of $8 million) expensive TIC sales in those years.  This is a great example of how using medians or averages can really affect the results.)

So, can we drill down further and come up with a condo premium per square foot? Stay tuned….

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